Prof Wadan Narsey: Election Issue for voters: Management of FNPF

21/02/2014

The Fiji National Provident Fund (FNPF), is the largest financial institution in Fiji in terms of assets, bigger than the commercial banks combined, and the largest lender to the Fiji Government.

The members of the FNPF (current contributors and pensioners) number around two hundred thousands, or roughly 40% of all the voters for the coming elections in Fiji. They represent an extremely powerful “voting block”.

The Bainimarama Government recently defended their extra-legal policy changes at FNPF.

They claimed that previous governments had used the FNPF as their  “piggy bank” (Fiji Sun, 7 Feb. 2014).

This last statement is certainly correct, but that criticism can equally be leveled at the Bainimarama Government itself, with more serious criticisms, including their massive reduction of pension rates from 15% to 9%.

Further, despite being in control for seven years, this Bainimarama Government has done nothing to ensure that future governments will not be able to control and use the FNPF as their “piggy bank”.

Mismanagement of FNPF
This Bainimarama Government is an unelected government which seized power through a military coup in 2006.

Marginalizing both unions and employers who used to nominate their representatives to the FNPF Board, the Bainimarama Government appointed all the FNPF board members, some of whom have been non-citizens, and some who have Permanent Residency in other countries.

By military decree the Bainimarama Government and the FNPF Board, forced through a massive decrease in pension rates of all pensioners.

The FNPF propaganda has focused only on those who used to enjoy admittedly over-generous rates above 15% (to as much as 25%)- but even these were voluntarily offered by FNPF as legal contracts and accepted by those pensioners.

But the official propaganda ignores the more significant reduction of future pension rates from 15% to 9%, with grave public doubts about the fairness of the 9% rate.

Existing pensioners who chose not to accept the 9% pension rates were forced to withdraw their original sums, despite a clear legal contract being in place between them and FNPF.

These reductions were forced through, despite the fact that the pensioners’ had mounted legal challenge, which had been accepted for hearing by Fiji’s High Court.

The FNPF  management, against all rules of good corporate practice, have arrogantly assumed the right to state and justify major changes in FNPF policies, which should properly be the domain of a lawfully appointed Board.

Even private expatriate consultants from Australia and NZ, have justified the policy changes through the media, implicitly supporting the unlawful military decrees.

The FNPF Board has mismanaged a number of major investments, in particular those at Natadola, Momi and the GPH, resulting in the writing down of hundreds of millions of dollars in assets. Undesirable loans have also been made, such as to Fiji Sugar Corporation.

The FNPF Board and Management have refused to release any of the reports of inquiries into the mismanagement of the investments, making a mockery of the frequent claims of transparency and accountability made by the FNPF Board and the Bainimarama Government.

What voters should ask political parties:
Voters in the coming elections must make the governance of FNPF an important election issue.

Voters must ask all political parties, including any party that Commodore Bainimarama might set up, what their policies will be on a thorough reform of the management of FNPF, including the following:

(a) Two thirds of the Board of the FNPF (and the Chairman) must be elected for five year terms by the members of the FNPF.

(b) The legal case that pensioners had in the courts must be reactivated, with the judiciary requested to hand down a lawful solution to the case, which could include (c) below.

(c) The FNPF Board commission a thorough independent review that recommends a fair pension rate that is consistent with the long-term sustainability of FNPF.

(d) To strengthen accountability and transparency of the FNPF Board, all reports into the mismanagement of FNPF funds as well as the reports that have justified the recent changes in pensions, be made public.

Readers may wish to refer to some of my previous posts on FNPF and its activities in the Fiji economy here and in particular here or the full Report for the Burness/Shameem case.